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SERVICE OPERATION MANAGEMENT
UNIT 3 SERVICE QUALITY
Service Quality – SERVQUAL – Gap model – Complaint Management – Walk through audit
– Service Recovery – Service Guarantees – Service Encounter
Contents
3.1 DEFINING SERVICE QUALITY ............................................................................................................. 2
3.2 GAPS IN SERVICE QUALITY ................................................................................................................ 3
3.3 SERVQUAL ......................................................................................................................................... 5
3.4 THE COMPLAINT MANAGEMENT PROCESS .................................................................................... 21
3.5 WALK-THROUGH-AUDIT ................................................................................................................. 26
3.6 SERVICE RECOVERY ......................................................................................................................... 33
3.7 SERVICE GUARANTEE ...................................................................................................................... 35
3.8 THE SERVICE ENCOUNTER TRIAD .................................................................................................... 36
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3.1 DEFINING SERVICE QUALITY
For services, the assessment of quality is made during the service delivery process, which
usually occurs with an encounter between a customer and a service contact person. Customer
satisfaction with service quality can be defined by comparing perceptions of the service received with
expectations of the service desired. When expectations are exceeded, service is perceived to be of
exceptional quality-and also to be a pleasant surprise. When expectations are not met, however,
service quality is deemed unacceptable. When expectations are confirmed by perceived service,
quality is satisfactory. As Figure 10.1 shows, these expectations are based on several sources,
including word of mouth, personal needs, and past experience.
Dimensions of Service Quality
The dimensions of service quality as shown in Figure 10.1 were identified by marketing
researchers studying several different service categories; appliance repair, retail banking, longdistance telephone service, securities brokerage, and credit card companies. They identified five
principal dimensions that customers use to judge service quality-Reliability, responsiveness,
assurance, empathy, and tangibles, which are listed in order of declining relative importance to
customers.2
Reliability: The ability to perform the promised service both dependably and accurately. Reliable
service performance is a customer expectation and means that the service is accomplished on
time, in the same manner, and without errors every time. For example, receiving mail at
approximately the same time each day is important to most people. Reliability also extends into
the back office, where accuracy in billing and record keeping is expected.
Responsiveness: The willingness to help customers and to provide prompt service. Keeping
customers waiting, particularly for no apparent reason, creates unnecessary negative perceptions
of qualify. If a service failure occurs, the ability to recover quickly and with professionalism can
create very positive perceptions of quality. For example, serving complimentary drinks on a
delayed flight can turn a potentially poor customer experience into one that is remembered
favorably.
Assurance: The knowledge and courtesy of employees as well as their ability to convey trust and
confidence. The assurance dimension includes the following features: competence to perform the
service, politeness and respect for the customer, effective communication with the customer, and
the general attitude that the server has the customer's best interests at heart.
Empathy: The provision of caring, individualized attention to customers. Empathy includes the
following features: approachability, sensitivity, and effort to understand the customer's needs.
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One example of empathy is the ability of an airline gate attendant to make a customer's missed
connection the attendant's own problem and find a solution.
Tangibles: The appearance of physical facilities, equipment, personnel, and communication
materials. The condition of the physical surroundings (e.g., cleanliness) is tangible evidence of the
care and attention to detail that are exhibited by the service provider. This assessment dimension
also can extend to the conduct of other customers in the service (e.g., a noisy guest in the next
room at a hotel).
Customers use these five dimensions to form their judgments of service quality, which are
based on a comparison between expected and perceived service. The gap between expected and
perceived service is a measure of service quality; satisfaction is either negative or positive.
3.2 GAPS IN SERVICE QUALITY
Measuring the gap between expected service and perceived service is a routine customer
feedback process that is practiced by leading service companies. For example, Club Med, an
international hotel chain operating resort villages worldwide, uses the questionnaire shown in Figure
10.2. This questionnaire is mailed to all guests immediately after their departure from a Club Med
vacation to assess the quality of their experience. Note that the first question explicitly asks the guest
to evaluate the gap between his or her expectations and the actual Club Med experience.
In Figure 10.3, the gap between customer expectations and perceptions is defined as GAP 5.
It is shown to depend on the size and direction of the four gaps that are associated with delivery of the
service.
The first gap is the discrepancy between customer expectations and management perceptions
of these expectations. GAP 1 arises from management's lack of full understanding about how
customers formulate their expectations on the basis of a number of sources: advertising, past
experience with the firm and its competitors, personal needs, and communications with friends.
Strategies for closing this gap include improving market research, fostering better communication
between management and its contact employees, and reducing the number of levels of management
that distance the customer.
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The second gap results from management's inability to formulate target levels of service
quality to meet perceptions of customer expectations and translate these into workable specifications.
GAP 2 may result from a lack of management commitment to service quality or a perception of the
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unfeasibility of meeting customers' expectations; however, setting goals and standardizing service
delivery tasks can close this gap.
The third gap is referred to as the service performance gap, because actual delivery of the
service does not meet the specifications set by management. GAP 3 can arise for a number of reasons,
including lack of teamwork, poor employee selection, inadequate training, and inappropriate job
design.
Customer expectations of the service are formed by media advertising and other
communications from the firm. GAP 4 is the discrepancy between service delivery and external
communications in the form of exaggerated promises and lack of information provided to contact
personnel.
The remainder of this chapter will address ways of closing these gaps in service quality. We
begin by considering approaches to measuring service quality.
MEASURING SERVICE QUALITY
Measuring service quality is a challenge, because customer satisfaction is determined by
many intangible factors. Unlike a product with physical features that can be objectively measured
(e.g., the fit and finish of a car), service quality contains many psychological features (e.g., the
ambiance of a restaurant). In addition, service quality often extends beyond the immediate encounter,
because, as in the case of health care, it has an impact on a person's future quality of life. The multiple
dimensions of service quality are captured in the SERVQUAL instrument, which is an effective tool
for surveying customer satisfaction that is based on the service quality gap model.
3.3 SERVQUAL
The authors of the service quality gap model shown in Figure 10.3 developed a multiple-item
scale called SERVQUAL for measuring the five dimensions of service quality (i.e., reliability,
responsiveness, assurance, empathy, and tangibles). This two-part instrument, which is shown in
Table 10.1, has an initial section to record customer expectations for a class of services (e.g., budget
hotels), followed by a second section to record a customer's perceptions for a particular service firm.
The 22 statements in the survey describe aspects of the five dimensions of service quality.
A score for the quality of service is calculated by computing the differences between the ratings
that customers assign to paired expectation and perception statements. This score is referred to as
GAP 5, as was shown in Figure 10.3. Scores for the other four gaps also can be calculated in a similar
manner.
This instrument has been designed and validated for use in a variety of service encounters. The
authors have suggested many applications for SERVQUAL, but its most important function is
tracking service quality trends through periodic customer surveys. For multisite services,
SERVQUAL could be used by management to determine if any unit has poor service quality
(indicated by a low score); if so, management can direct attention to correcting the source of customers' poor perceptions. SERVQUAL could be used in marketing studies to compare a service with a
competitor's and again identify the dimensions of superior or inadequate service quality.
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Benchmarking
The measure of the quality of a firm's performance can be made by comparison with the
performance of other companies known for being "best in class," which is a process known
as benchmarking. For example, Singapore Airlines has a reputation for outstanding cabin service,
Federal Express for consistent overnight delivery, Hampton Inns for clean rooms, and Nordstrom's
department store for attentive salespersons. For every quality dimension, some firm has earned the
reputation for being "best in class" and, thus, is a benchmark for comparison. Benchmarking,
however, involves more than comparing statistics. It also includes visiting the leading firm to learn
firsthand how management has achieved such outstanding performance. For obvious proprietary
reasons, this often requires going outside one's own field. Some manufacturers, for example, have
visited the pit stops at automobile races to learn methods of reducing the time for production-line
changeovers. Others have visited Domino's Pizza to understand how it delivers customized products
within 30 minutes.
For a typical example, consider an electronics company seeking to improve its purchasing
function. This company formed a study team that visited Ford to learn how it reduced the number of
its suppliers, talked with Toyota about vendor relationships, and observed the buying process at
Reliance Electric. The team returned with quantifiable measures that benchmarked the superior performance of these leading firms and with knowledge of how these gains were accomplished.
Scope of Service Quality
A comprehensive view of the service system is necessary to identify the possible measures of
service quality. We will use health care delivery as our example service, and we will view quality
from five perspectives: content, process, structure, outcome, and impact. For health care, the scope of
service quality obviously extends beyond the quality of care that is provided for the patient; it also
includes the impact on the family and community. This comprehensive view of service quality need
not be limited to health care, however, as demonstrated by the negative economic impact of failed
savings-and-loan institutions on their customers as well as on the community as a whole.
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*A seven-point scale ranging from "Strongly Agree" (7) to "Strongly Disagree" (I), with no verbal
labels for the intermediate scale points (i.e., 2 through 6), accompanied each statement. Also, the
statements were in random order in the questionnaire. A complete listing of the 34-item instrument
used in the second stage of data collection can be obtained from the first author.
Content
Are standard procedures being followed? For example, is the dentist following accepted
dental practices when extracting a tooth? For routine services, standard operating procedures
generally are developed, and service personnel are expected to follow these established procedures. In
health care, a formal peer-review system, called Professional Standards Review Organization
(PSRO), has been developed as a method of self-regulation. Under this system, physicians in a
community or specialty establish standards for their practices and meet regularly to review peer
performance so that compliance is assured.
Process
Is the sequence of events in the service process appropriate? The primary concern here is
maintaining a logical sequence of activities and a well coordinated use of service resources.
Interactions between the customer and thi service personnel are monitored. Also of interest are the
interactions and com munications among the service workers. Check sheets such as the one shown ii
Table 10.2 are common measurement devices. For emergency services such a: fire and ambulance,
disaster drills in a realistic setting are used to test a unit': performance; problems with coordination
and activity sequencing can be identified and corrected through these practice sessions.
Structure
Are the physical facilities and organizational design adequate for the service? The physical
facilities and support equipment are only part of the structural dimension, however. Qualifications of
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the personnel and the organizational design also are important quality dimensions. For example, the
quality of medical care in a group practice can be enhanced by an on-site laboratory and x-ray
facilities. More important, the organization may facilitate consultations among the participating
physicians. A group medical practice also provides the opportunity for peer pressure to control the
quality of care that its members provide,
Adequacy of the physical facilities and equipment can be determined by comparison with set
standards for quality conformance. One well-known fast-food restaurant is recognized for its attention
to cleanliness. Store managers are subjected to surprise inspections in which they are held responsible
for the appearance of the parking lot, sidewalk, and restaurant interior. Personnel qualifications for
hiring, promotion, and merit increases also are matters of meeting standards. University professors
seldom are granted tenure unless they have published, because the ability to publish in a refereed
journal is considered to be independent evidence of research quality. A measure of organizational
effectiveness in controlling quality would be the presence of active self-evaluation procedures and
members' knowledge of their peers' performances.
Outcome
What change in status has the service effected? The ultimate measure of service quality is a
study of the end result. Is the consumer satisfied? We are all familiar with the cards on restaurant
tables that request our comments on the quality of service. Complaints by consumers are one of the
most effective measures of the quality outcome dimension. For public services, the assumption often
is made that the status quo is acceptable unless the level of complaints begins to rise. The concept of
monitoring output quality by tracking some measure (e.g., the number of complaints) is widely used.
For example, the performance of a hospital is monitored by comparing certain measures against
industry norms. The infection rate per 1000 surgeries might be used to identify hospitals that may be
using substandard operating room procedures.
Clever approaches to measuring outcome quality often are employed. For example, the
quality of trash pick-up in a city can be documented by taking pictures of the city streets after the
trash vehicles have made their rounds. One often-forgotten measure of outcome quality is the
satisfaction of empowered service personnel with their own performance.
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Impact
What is the long-range effect of the service on the consumer? Are the citizens of a community
able to walk the streets at night with a sense of security? The result of a poll asking that question
would be a measure of the impact of police performance. The overall impact of health care often is
measured by life expectancy or the infant mortality rate, and the impact of education often is measured by literacy rates and performance on nationally standardized tests.
It should be noted, however, that the impact also must include a measure of service and
accessibility, which usually is quoted as the population served per unit area. Health care in the
United States is criticized for the financial barriers to patient accessibility in general but especially in
rural and large inner-city areas. As a result, this country's impact measures of life expectancy and
infant mortality are far worse than those in all other industrial countries and even several Third
World countries. In a similar fashion, the literacy rate is a measure of the impact of the education
system, and again, the United States lags behind many other nations. Health care and education are
perhaps the two most essential services in the United States today. Clearly, they are in great need of
managers who can devise and implement excellent and innovative service operations strategies.
A commercial example of an impact measurement is the number of hamburgers sold, which once
was displayed in neon lights by McDonald's. In addition, a bank's lending rate for minorities could
be a measure of that institution's economic impact on a community.
Table 10.3 illustrates how this service quality perspective can be applied to measuring the
quality of service delivered by a health clinic.
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QUALITY SERVICE BY DESIGN
Quality can neither be inspected into a product nor somehow added on, and this same
observation applies to services. A concern for quality begins with the design of the service delivery
system. How can quality be designed into a service? One approach is to focus on the four
dimensions of the service package that we explored in Chapter 2, The Nature of Services.
Incorporation of Quality in the Service Package
Consider the example of a budget hotel competing on overall cost leadership:
Supporting facility: Architecturally, the building is designed to be constructed of materials that are
maintenance-free, such as concrete blocks. The grounds are watered by an automated underground
sprinkler system. The air-conditioning and heating system is decentralized by using individual room
units to confine any failure to just one room.
Facilitating goods: Room furnishings are durable and easy to clean (e.g., bed side tables are
supported from the wall to facilitate carpet cleaning). Disposable plastic cups are used instead of
glass, which is more expensive, requires cleaning, and, thus, would detract from the budget image.
Explicit services: Maids are trained to clean and make up rooms in a standard manner. Every room
has the same appearance, including such "trivial" matters as the opening of the drapes.
Implicit service: Individuals with a pleasant appearance and good interpersonal skills are recruited as
desk clerks. Training in standard operating procedures (SOPs) ensures uniform and predictable
treatment for all guests. Anon-line computer tracks guest billing, reservations, and registration processing. This system allows guests to check out quickly and automatically
notifies the cleaning staff when a room is free to be made up.
Table 10.4 illustrates how the budget hotel has taken these design features and implemented a
quality system to maintain conformance to the design requirements. The approach is based on
Philip Crosby's definition of quality as "conformance to requirements." This example illustrates the
need to define explicitly, in measurable terms, what constitutes conformance to requirements.
Quality is seen as an action-oriented activity requiring corrective measures when nonconformance
occurs.
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Taguchi Methods
The example above illustrates the application of Taguchi methods, which are named after
Genichi Taguchi, who advocated "robust design" of products to ensure their proper functioning under
adverse conditions. The idea is that for a customer, proof of a product's quality is in its performance
when abused. For example, a telephone is designed to be far more durable than necessary, because
more than once it will be pulled off a desk and dropped on the floor. In our budget hotel example, the
building is constructed of concrete blocks and furnished with durable furniture.
Taguchi also applied the concept of robustness to the manufacturing process. For example,
the recipe for caramel candy was reformulated to make plasticity, or chewiness, less sensitive to the
cooking temperature. Similarly, our budget hotel uses an on-line computer to notify the cleaning staff
automatically when a room has been vacated. Keeping the maids posted on which rooms are available
for cleaning allows this task to be spread throughout the day, thus avoiding a rush in the late afternoon
that could result in quality degradation.
Taguchi believed that product quality was achieved by consistently meeting design
specifications. He measured the cost of poor quality by the square of the deviation from the target, as
shown in Figure 10.4. Once again, note the attention to standard operating procedures (SOPs) used by
the budget hotel to promote uniform treatment of guests and consistent preparation of the rooms.
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Poka-yoke
Shigeo Shingo believed that low-cost, in-process quality-control mechanisms and routines
used by employees in their work could achieve high quality without costly inspection. He observed
that errors occurred not because employees were incompetent, but because of lapses in attention or the
worker being interrupted. He advocated the adoption of poka-yoke methods, which can be translated
roughly as "foolproof" devices. The poka-yoke methods use checklists or manual devices that do not
let the employee make a mistake.
For example, recall McDonald's use of the french fry scoop, which measures out a consistent
serving of potatoes. This poka-yoke device also enhances cleanliness and, hence, the aesthetic quality
of the service as well. The emergency room check sheet in Table 10.2 is another poka-yoke device
that reminds workers of steps often forgotten in hurrying to satisfy patients in a timely manner.
Limiting employee discretion by physical design or the institution of SOPs is an important strategy in
service quality control. Because it is difficult for management to intervene in the service process and
impose a quality-appraisal system (i.e., inspection and testing), limiting discretion and incorporating
poka-yoke methods facilitate mistake-free service. It is interesting to note how these unobtrusive design features channel service behavior without the slightest hint of coercion-as many of us experience
when we hear a "beep" from Microsoft Word for Windows to warn us that an invalid keystroke has
been made.
Quality Function Deployment
To provide customer input at the product design stage, a process called quality function
deployment (QFD) was developed in Japan and used extensively by Toyota and its suppliers. The
process results in a matrix, referred to as a "house of quality," for a particular product that relates
customer attributes to engineering characteristics. The central idea of QFD is the belief that products
should be designed to reflect the customers' desires and tastes; thus, the functions of marketing,
design engineering, and manufacturing must be coordinated. The "house of quality" provides a
framework for translating customer satisfaction into identifiable and measurable conformance
specifications for product or service design.
Although QFD was developed for use in product planning, its application to the design of
service delivery systems is very appropriate, as shown by the following example.
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The steps in conducting the QFD project and constructing a "house of quality" follow:
1. Establish the aim of the project. In this case, the objective of the project is to assess Village
Volvo's competitive position. QFD also could be used when anew service delivery system is being
considered for the first time.
2. Determine customer expectations. Based on the aim of this project, identify the customer group
to be satisfied and determine their expectations, For Village Volvo, the target customer group are
Volvo owners with nonroutine repairs(i.e., exclude routine maintenance for this study). Customer
expectations could be solicited by interviews, focus groups, or questionnaires. In this example, we
will use the five dimensions of service quality to describe customer expectations. As shown in
Figure 10.5, these are the rows of the house of quality. In a more sophisticated QFD project,
customer expectations are broken down into primary, secondary, and tertiary levels of detail; for
example, the primary expectation of "reliability" could be further specified with "accuracy" at the
secondary level and "correct problem diagnosed" as the tertiary level of detail.
3. Describe the elements of the service. The columns of the house of quality matrix contain the
service elements that management can manipulate to satisfy customer expectations. For Village
Volvo, we have selected training, attitudes, capacity, information, and equipment.
4. Note the strength of relationship between the service elements. The roof of the house of quality
provides an opportunity to note the strength of correlation between pairs of service elements. We
have noted three levels of strength of
relationship: * = strong, = medium, and 0 = weak. As you might expect, we note a strong relationship
between training and attitudes. Noting these relationships between elements may provide useful
points of leverage to improve service quality.
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5. Note the association between customer expectations and service elements. The body of the
matrix contains numbers between 0 and 9 (9 indicating a very strong link) to indicate the strength of
the link between a service element and a corresponding customer expectation. These numbers would
follow a discussion by the project team about how various service elements affect the firm's capacity
to satisfy the different customer expectations.
6. Weighting the service elements. This step is taken to measure the importance of a customer's
assessment of the service element. The chimney of the house of quality contains a listing of the
relative importance of each customer expectation. These weights on a scale of 1 to 9 indicate the
importance that customers place on each of their expectations and could be determined by a customer
survey. The relative importance will be multiplied by the strength of the link number in the body of
the matrix under each service element to arrive at a weighted score for that element. For example, the
training element would have a weighted score, which is calculated as:
(9X8) + (7X3) + (6X5) + (4X0) + (2)(2) = 127
The weighted scores are entered in the basement of the house of quality and represent a measure of
each service element's importance to satisfying customer needs. These weighted results should be
treated with caution and common sense, however, because they depend on uncertain estimates of
relative importance and relationship scores.
7. Service element improvement difficulty rank. In the basement of the house is a ranking for the
difficulty of improving each service element, with a rank of1 being the most difficult. Capacity and
equipment have a high rank because of their capital requirements. This exercise demonstrates that
even though customers may give a service element a high rank, the firm may be unable to deliver it.
8. Assessment of competition. A study of the Volvo dealer is made to assess customers' perceptions
of service at the dealer compared with that at Village Volvo. The result of a customer survey (using
customers who have experienced both providers) using a five-point scale is plotted to the right of the
matrix. Based on knowledge of the dealer (perhaps from mechanics), 3 relative comparison of the
level (plus or minus) of each service element is plotted at the bottom of the matrix. This information
will be used to assess the competitive strengths and weaknesses of Village Volvo.
9. Strategic assessment and goal setting. Looking at the completed house of quality, Village Volvo
can see some strengths and weaknesses in its strategic position relative to the Volvo dealer. Except for
responsiveness, it is viewed favorably by its customers. This result must be viewed
with caution, however, because these data were obtained from a survey of Village Volvo customers
and, thus, were not unexpected. The comparison of service elements with the Volvo dealer and
weighted scores yields some possible directions for improvement in service. In the area of attitudes
and information, Village Volvo is in a superior position, but there appears to be a problem with
capacity, training, and equipment. The high-weighted score given to training suggests that a firstpriority goal of an investment in training might be in order. In addition, leverage would be achieved,
because training has relationships, from strong to weak, with attitudes, capacity, and equipment.
Finally, the improvement difficulty rank for training is fourth out of five.
ACHIEVING SERVICE QUALITY
Services are difficult for customers to evaluate before the fact. As we have already noted,
they are intangible and consumed simultaneously with production. This presents a challenge to the
service manager, because quality-inspection intervention between the customer and the contact
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employee is not an option as in manufacturing (e.g., no slip of paper can be placed in the box by
Inspector Number 12).
Cost of Quality
Caveat emptor "let the buyer beware" -has become obsolete. As American businesses
discovered in the late 1980s and early 1990s, impersonal service, faulty products, and broken
promises all carry a price. A very visible example of this reality today is the prominent part that
liability concerns and insurance play in almost every service imaginable. Poor quality can lead to
bankruptcy. A gourmet soup company, for example, was forced out of business when its vichyssoise
was found to contain poison-producing botulism organisms. Announcements of automobile recalls for
correcting defects are commonplace as well.
Products can be returned, exchanged, or fixed, but what recourse does the customer of a
faulty service have? Legal recourse! Medical malpractice lawsuits have been notorious for their large
settlements, and although some cases of abuse by the legal system surely have occurred, the
possibility of malpractice litigation does promote a physician's sense of responsibility to the patient.
The threat of a negligence suit might induce a responsible doctor to take more time in an examination,
seek more training, or avoid performing a procedure for which he or she is not competent.
Unfortunately, as evidenced by the frequent claims of physicians that extra testing is necessary to
defend against potential malpractice claims, the cost of care may increase without any improvement
in quality.
No service has immunity from prosecution. For example, a Las Vegas hotel was sued for
failing to provide proper security when a guest was assaulted in her room. An income tax preparer can
be fined up to $500 per return if a taxpayer’s liability is understated because of the preparer's
negligence or disregard of Internal Revenue Service rules and regulations.
A noted quality expert, Joseph M. Juran, has advocated a cost-of-quality accounting system to
convince top management of the need to address quality issues.9 He identified four categories of
costs: internal failure costs (from defects discovered before shipment), external failure costs (from
defects discovered after shipment), detection costs (for inspection of purchased materials and during
manufacture), and prevention costs (for keeping defects from occurring in the first place). Juran found
that in most manufacturing companies, external and internal failure costs together accounted for 50 to
80 percent of the total cost of quality. Thus, to minimize this total cost, he advocated that more
attention be paid to prevention. Suggestions have been made that $1 invested in prevention is worth
$100 in detection costs and $10,000 in failure costs.
In Table 10.5, we have adapted Juran's cost-of-quality system for use by service firms with a
banking example. In the prevention row, recruitment and selection of service personnel are viewed as
ways to avoid poor quality. Identifying people with appropriate attitudes and interpersonal skills can
result in hiring contact persons with the natural instincts that are needed to serve customers well.
Inspection is included in the detection row, but it generally is impractical except in the backoffice operations of a service.
Because service is an experience for the customer, any failure becomes a story for that
customer to tell others. Service managers must recognize that dissatisfied customers not only will take
their future business elsewhere but also tell others about the unhappy experience, thus resulting in a
significant loss of future business.
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PROGRAMS FOR SERVICE QUALITY IMPROVEMENT
Service quality begins with people. All our measurements to detect nonconformance by
means of statistically based control charts do not produce a quality service; instead, quality begins
with the development of positive attitudes among all people in the organization. How is
this accomplished? Positive attitudes can be fostered through a coordinated program that begins with
employee selection and progresses through training, initial job assignments, and other aspects of career advancements. To avoid complacency, an ongoing quality-improvement program is required.
These programs emphasize preventing poor quality, taking personal responsibility for quality, and
building an attitude that quality can be made certain.
Personnel Programs for Quality Assurance
Multisite service firms face special problems of maintaining consistent service across all
units. For example, customers expect the same service from a hotel unit in Chicago that they found
previously in a New Orleans unit of the same chain. In fact, the idea of "finding no surprises" is used
as a marketing feature. G. M. Hostage believes the success of Marriott Corporation results in part
from personnel programs that stress training, standards of performance, career development, and
rewards. He finds that service quality is enhanced by the attitude a company takes toward its
employees. The following eight programs have been the most effective:
1. Individual development. Using programmed instruction manuals, new management trainees
acquire the skills and technical knowledge that are needed for the entry-level position of assistant
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manager. For a geographically dispersed organization, these manuals ensure that job skills are
taught in a consistent manner.
2. Management training. Management personnel through the middle levels attend one management
development session each year. A variety of professional management topics are addressed in 2and 3-day seminars that are attended by lower-level managers from various operating divisions.
3. Human resources planning. The kinds of people who will be needed to fill key company
positions in the coming years are identified, and an inventory of good prospects is created for
future promotion. A key element of the plan is periodic performance review of all management
personnel.
4. Standards of performance. A set of booklets was developed to instruct employees in how to
conduct themselves when dealing with guests and, in some cases, even in how to speak.
The Marriott Bellman stresses how to make agues feel welcome and special. The Switchboard
Operator tells in detail how to speak with a guest and handle a variety of specific situations.
The Housekeeper tells precisely how a room is to be made up, right down to the detail of placing
the wrapped soap bar on the proper corner of the washbasin with the label upright. In many cases,
booklets are accompanied by an audiovisual film or a videotape to demonstrate proper procedures.
Adherence to these standards is checked by random visits from a flying squad of inspectors.
5. Career progression. A job-advancement program with a ladder of positions of increasing skill
and responsibility gives employees the opportunity to grow with the company.
6. Opinion surveys. An annual rank-and-file opinion survey is conducted by trained personnel at
each unit. Subsequently, the results are discussed at a meeting. This survey has acted as an early
warning system to head off the build-up of unfavorable attitudes.
7. Fair treatment. Employees are provided with a handbook of company expectations and
obligations to its personnel. The formal grievance procedure includes access to an ombudsperson
to help resolve difficulties.
8. Profit sharing. A profit-sharing plan recognizes that employees are responsible for much of the
company's success and that they deserve more than just a paycheck for their efforts.
Quality-Improvement Program to Achieve Zero Defects
Philip Crosby, a former vice president for quality at ITT and now a sought-after qualitymanagement consultant, advocates a 14-step zero-defects quality- improvement program.12 His
program has been implemented at a number of service firms, such as the Paul Revere Insurance
Company, and has the following 14 sequential steps:
1. Management commitment. The need for quality improvement first is discussed with members
of management to gain their commitment. This raises the level of visibility and concern for
quality at the highest levels, and it ensures everyone's cooperation.
2. Quality-improvement team. Representatives from each department are selected to form a team
that runs the quality-improvement program, which ensures each department's participation.
3. Quality measurement. The status of quality throughout the organization is audited. This requires
that quality measurements be reviewed and established where they do not exist. Once quality
becomes measurable, an objective evaluation is made to identify nonconformance and to monitor
corrective action. Developing quality measures for services is a difficult task, but it represents an
opportunity for worker participation. Service personnel most often respond with enthusiasm and
pride when asked to identify quality measures for their work.
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4. Cost-of-quality evaluation. To avoid any bias in the calculations, the comptroller 's office
identifies the cost of quality, which is composed of items such as litigation, rework, engineering
changes, and inspection labor. Measuring the cost of quality provides an indication of where
corrective action will be profitable for an organization.
5. Quality awareness. The cost of poor quality is communicated to supervisors and employees
through the use of booklets, films, and posters. This helps to change attitudes about quality by
providing visible evidence of the concern for quality improvement.
6. Corrective action. A systematic process of facing problems, talking about them, and resolving
them on a regular basis is needed. The habit of identifying quality problems and correcting them
at the local level is encouraged.
7. Establishment of a zero-defects program. Three or four members of the team are selected to
investigate the zero-defects concept and to implement the program. The committee should
understand the literal meaning of the phrase zero defects. The idea that everyone should do his or
her work right the first time must be communicated to all employees.
8. Supervisor training. A formal orientation is conducted for all levels of management to enable
them to explain the program to their people.
9. Zero-defects day. An event is created that employees can recognize as a turning point in the
organization's attitude toward quality. From this day on, zero defects will be the performance
standard for the organization.
10. Goal setting. Employees are encouraged to think in terms of establishing improvement goals for
themselves and their groups. Supervisors should help their employees to set specific and
measurable goals.
11. Error-cause removal. People are asked to describe on a simple, 1-page for many problem that
keeps them from performing error-free work. The appropriate department is asked to respond to
the problem expeditiously.
12. Recognition. Award programs are established to recognize those employees who meet their
goals. With genuine recognition of performance, continued support for the program will result.
13. Quality councils. The quality professionals are brought together on a regular basis to discuss
actions that are necessary to improve the program.
14. Do it over again. A typical program takes more than 1 year, and by then, employee turnover
necessitates a new educational effort. Such repetition makes the program a permanent part of the
organization.
Deming's 14-Point Program
W. Edwards Deming generally is credited with initiating the highly successful Japanese quality
revolution. In Deming's view, management was responsible for 85 percent of all quality problems
and, therefore, had to provide the leadership in changing the systems and processes that created them.
Management needed to refocus attention on meeting customer needs and on continuous improvement
to stay ahead of the competition. His philosophy is captured in a 14-point program13:
1. Create constancy of purpose for improvements of product and service. Management must
stop its preoccupation solely with the next quarter and build for the future. Innovation in all areas
of business should be expected.
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2. Adopt the new philosophy. Refuse to allow commonly accepted poor levels of work, delays,
and lax service.
3. Cease dependence on mass inspection. Inspection comes too late and is costly. Instead, focus
on improving the process itself.
4. End the practice of awarding business on price tag alone. The purchasing department should
buy on the basis of statistical evidence of quality, not on the basis of price. Reduce the number of
vendors, and reward high-quality suppliers with long-term contracts.
5. Constantly and forever improve the system of production and service. Search continually for
problems in the system, and seek ways of improvement. Waste must be reduced and quality
improved in every business activity, both front-office and back-office.
6. Institute modern methods of training on the job. Restructure training to define acceptable
levels of work. Use statistical methods to evaluate training.
7. Institute modern methods of supervising. Focus supervision on helping workers to do a better
job. Provide the tools and techniques to promote pride in one's work.
8. Drive out fear. Eliminate fear by encouraging the communication of problems and expression of
ideas.
9. Break down barriers between departments. Encourage problem solving through teamwork
and use of quality-control circles.
10. Eliminate numerical goals for the workforce. Goals, slogans, and posters cajoling workers to
increase productivity should be eliminated. Such exhortations cause worker resentment, because
most of the necessary changes are outside their control.
11. Eliminate work standards and numerical quotas. Production quotas focus on quantity, and
they guarantee poor quality in their attainment. Quality goals such as an acceptable percentage of
defective items do not motivate workers toward improvement. Use statistical methods for
continuing improvement of quality and productivity.
12. Remove barriers that hinder hourly workers. Workers need feedback on the quality of their
work. All barriers to pride in one's work must be removed.
13. Institute a vigorous program of education and training. Because of changes in technology
and turnover of personnel, all employees need continual training and retraining. All training must
include basic statistical techniques.
14. Create a structure in top management that will push every day on the above
13points. Clearly define management's permanent commitment to continuous improvement in
both quality and productivity.
3.4 THE COMPLAINT MANAGEMENT PROCESS
The process contains six steps in the complaint management process that influence effective
service recovery and in turn influence patient satisfaction and loyalty and ultimately customer
retention and hospital revenues. The six steps of the complaint management process are as follows:
1.
2.
3.
4.
Encourage complaints as a QI tool
Establish a team of representatives to handle complaints
Resolve customer problems quickly and effectively
Develop a complaint database
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5. Commit to identifying failure points in the service system and
6. Track trends and use information to improve service processes.
These six steps and recommended actions to take during each step, are now described.
1. Encourage Complaints as a QI Tool
It is important for the hospital to institute a formal policy throughout the organization
to provide a mechanism for patient complaints. The hospital should view complaints as a QI
tool and make it easy for customers to complain. Inform patients and their families of the
complaint process on admission to the hospital and reinforce the organization’s commitment
to service excellence and the importance of complaints to both patients and staff by posting
visual materials throughout hospital. Require staff to record all complaints on a formal log
sheet for documentation purposes and make them aware that complaints are encouraged for
quality, rather than disciplinary, purposes. Provide monetary and nonmonetary incentives to
employees who support the complaint management process. Reward and recognize
employees who comply with procedures to record patient complaints, and deny rewards and
recognition to those who do not. A combination of individual and team-based compensation,
rewards, and recognition will reinforce and illustrate the value of complaint management to
all employees.
There are several ways for a health care organization to encourage complaints.
Patients and families can be informed of the complaint resolution process as part of the
admission process. Patient handbooks can provide information on the complaint management
process, with a contact number to call if conflict arises. Patients can be provided with an
information flyer in their rooms that communicates the hospital’s commitment to service
excellence and includes a customer service hotline number. Posters can be placed in the
hallways that encourage patients to express complaints and concerns, with a contact telephone
number listed. Finally, complaints can be solicited from patient satisfaction surveys that are
mailed to patients after discharge.
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2. Establish a Team of Representatives to Handle Complaints
To implement the complaint management process, the hospital should develop a
formal complaint management program by assembling representatives from each step in the
complaint management handling process, ranging from front-line workers to top
management. Front-line employees deal most closely and frequently with patients and, as a
result, can provide valuable feedback in decisions regarding the complaint handling process.
A cross-functional team of representatives from various areas of the hospital can help unite all
areas responsible for addressing patient complaints. These team members can then act as
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champions in their areas of responsibility and encourage other employees to support the
complaint management process. In addition, certain staff members can be designated to
oversee a specific complaint through to final resolution.
Once the team has been assembled, the team members can identify specific steps to
be taken when handling complaints from first contact to final resolution. The team members
can define what the organization will consider a complaint, develop common categories of
complaints for coding purposes, design a feedback mechanism to collect the complaint data,
and establish reporting capabilities that enable the organization to use the complaint data in
their QI efforts. When the formal complaint process is finalized, it should be communicated
to everyone in the organization.
3. Resolve Customer Problems Quickly and Effectively
Once a complaint is expressed, it can be documented on a formal complaint log and
forwarded to the appropriate department manager. The department manager can then
complete the detailed assessment of the complaint and take the necessary steps to resolve the
problem. Resolution of complaints can be prioritized by level of importance. For example, the
hospital may prioritize and expect immediate action to resolve complaints of patients who
were currently receiving care with immediate risk or compromise of quality identified. It may
not be necessary to immediately resolve complaints from patients who are not currently
receiving care with no risk or quality issues present, so the hospital can commit to resolving
these issues within five business days. The department manager should record the attempt at
resolution within the specified time frame, according to the prioritization of the complaint.
It is important for hospital personnel to feel comfortable with their ability and
authority to resolve a complaint. While empowerment can extend to all levels of the
organization, it should particularly focus on front-line personnel, since it has been estimated
that 65% of all complaints are initiated with front-line workers. Empowerment can be
fostered by giving employees a way to resolve or handle customer complaints. Training
materials demonstrating appropriate complaint responses help give employees the authority
and confidence needed to address a problematic issue. A procedures manual addressing
complaint management issues could provide employees with information pertaining to
frequently asked questions with suggested responses, actual scripts of common customer
complaints and suitable employee responses, and standard response letters that serve as
guidelines for preparing more personal customer responses. In addition, employees can
receive training and education during orientation, through in-service sessions, in memos and
newsletters, and in regular staff meetings.
The recovery process can include a personal call to the dissatisfied patient from a
staff member. The staff member can apologize for the problem, ensure the patient that action
was taken and the situation has been corrected for future encounters, thank the patient for
using the hospital, and encourage the patient to use the hospital again if services are needed in
the future. It is important to gain organization wide commitment to resolving complaints
immediately to reduce the time and money involved in making additional contacts with the
dissatisfied customer. By training and empowering employees to resolve complaints on first
contact whenever possible, problems can be resolved more quickly and effectively. It is also
important that frontline employees have the authority to take the steps necessary to resolve
customer complaints. Taking action on initial contact minimizes the risk that a dissatisfied
customer will be transferred from one employee to another to get the problem resolved.
4. Develop a Complaint Database
The hospital can develop a formal complaint log that captures complaint management
information, and each employee should be required to record the actions taken to resolve a
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complaint. This will allow complaints to be logged and tracked for follow-up and
documentation purposes. A computerized database of all complaints can be developed to
identify trends and generate regular reports of complaint information to hospital and staff.
Regular reports on complaint data, including actions taken toward resolution, demonstrate the
effectiveness of the complaint management program and reinforce the organization’s ongoing
commitment to encouraging complaints.
Fewer than half of the patients who have a negative experience with a hospital
respond actively to change the dissatisfactory situation, which suggests that written
complaints are just the tip of the iceberg. Many times customers lodge complaints with the
nearest employee they can find. Although it is certainly a challenge to ensure that complaints
delivered in this manner are communicated back to the organization, it is vital for an accurate
assessment of organizational performance. Hospitals should pay attention to oral complaints
made to hospital personnel because they are an accurate reflection of the level of
dissatisfaction with hospital services.
Field reports from one hospital involve a standardized systematic approach to
complaint management; to capture the complaint as soon as possible, a physician or staff
member who receives a complaint immediately refers the patient to management personnel. If
a manager is not available, the complaint is recorded on a standard patient complaint form.
The information recorded on the complaint form must accurately report the allegation as well
as the patient’s suggestion for correcting the situation. The complaint form is then forwarded
to the appropriate manager for further investigation.
To gain employee buy-in for the complaint management process, it is important to
make it easy for employees to track complaints. The hospital can provide employees with
simple complaint forms that serve as internal documentation used to record service failures. It
can also hire or designate certain employees to respond immediately to complaints that
require prompt attention, such as complaints regarding quality or medical issues. For
complaints that do not require immediate resolution, employees can log the complaint by
using coded data or flagging the patient’s record until the appropriate manager can attend to
the complaint. The process can be further simplified by appointing a complaint coordinator
whose primary responsibility is tracking and compiling complaints soon after they are
registered. Employees for whom the workload does not permit an immediate filing of the
complaint could direct the patient to address the complaint to the appropriate personnel.
5. Commit to Identifying Failure Points in the Service System
Complaint data are useful in identifying failure points in the system that is the root
causes of customer dissatisfaction. By analyzing the complaint data, information on failure
points can be referred to the area of the organization that can best fix the problem to ensure
that future problems of the same nature are avoided. More importantly, the organization
should be proactive, rather than reactive, and commit to anticipating and preventing
dissatisfactory situations from occurring in the first place. Anticipating and preventing a
service failure may require the organization to invest some time in marketing research
activities. Organizations often do not clearly understand the expectations of their customers.
Utilizing marketing research to better understand customer expectations will help the
organization manage the service recovery process more successfully. Various marketing
research studies are available, including critical incident studies, in which customers provide
detailed stories about satisfying and dissatisfying encounters at the transaction level;
relationship surveys, in which customers report their relationship with all elements of the
service received, enabling the organization to assess its strengths and weaknesses; and focus
groups or customer panels, where ongoing groups of customers are assembled to provide
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attitudes and perceptions about a service over time. By using customer feedback to
understand customer expectations, an organization can educate its customers on what to
expect and can set more realistic expectations if necessary through communication strategies.
Another way to identify failure points in the system is to periodically and randomly
phone patients who report dissatisfaction with their service but do not include a complaint on
the satisfaction survey questionnaire. A staff member can solicit information from these
dissatisfied patients regarding comments or suggestions on what the hospital could have done
to improve the service or what might be done in the future to improve services. In these
solicited situations, however, patients might be reluctant to divulge any negative information
about the hospital, even when they are given a final opportunity to do so. It is important to
encourage dissatisfied patients to respond because many patients who do not file formal
complaints or give the hospital an opportunity to resolve unsatisfactory situations will not
return to the hospital in the future, when other needs for health care arise.
6. Track Trends and Use Information to Improve Service Processes
Hospitals can benefit from using complaint information to identify trends or service
areas that are in need of improvement to minimize the likelihood that similar complaints will
recur in the future. The development of a tracking system that captures and aggregates patient
complaints is enhanced by using a coding scheme that categorizes complaints into database
software that generates reports containing department-specific, location-specific, and
organization wide information. The complaint tracking process can enable the hospital to
search for trends that might occur so process improvements are made in a strategic manner.
Handling complaints and problems one at a time, without gaining anything from the
information, is inefficient and should be avoided. Customers usually understand that mistakes
happen, but they expect the organization to have a problem corrected the next time. An
organization that identifies and resolves patient complaints one at a time cannot take
advantage of the QI opportunity that results from tracking trends and making process changes
that reduce the likelihood that similar complaints will recur in the future.
3.5 WALK-THROUGH-AUDIT
Delivery of a service should conform to the customer's expectations from the be-ginning to
the end of the experience, because the customer is a participant in the service process and his or her
impression of service quality is influenced by many observations. An environmental audit can be a
useful management tool for the systematic evaluation of a customer's view of the service being
provided.
Such a walk-through-audit was developed by Fitzsimmons and Maurer for sit-down
restaurants in which the customer is served. The audit consisted of 42 questions spanning the
restaurant dining experience, beginning with ap-proaching the restaurant from the parking area, then
walking into the restaurant and being greeted, waiting for a table, being seated, ordering and receiving
food and drinks, and finally, receiving the check and paying the bill. Sample questions from the walkthrough-audit are shown in Figure 6.8. The questions span nine categories of variables: 1)
maintenance items, 2) person-to-person service, 3) waiting, 4) table and place settings, 5) ambiance,
6) food presentation, 7) check presentation, 8) promotion and suggestive selling, and 9) tipping.
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This audit was mailed to the owners or managers of 250 restaurants through-out Texas to
study the relationship of tipping behavior to environmental variables. Many or the comparisons within
the study relate directly to the level 01 tipping as a percentage of the total bill. Tipping is a good
measure of customer satisfaction. Clearly, however, some customers can be satisfied and still leave
rel-atively low tips, and other customers will tip at a given level regardless of the quality of service
they perceive. Within this study, tipping percentages ranged from less than 8 percent to more than 15
percent. Questions that relate to tipping behavior were grouped into the following categories: 1)
person-to-person ser-vice, 2) service delays, 3) ambiance variables, 4) check presentation, and 5)
pro-motion and suggestive selling.
1. Person-to-Person Service
It was anticipated that high levels of person-to-person service would relate to high
customer satisfaction and, therefore, to large tips. This was confirmed by the study. Several
variables have a strong positive relationship to the size of the tip: 1) the time the server spends
at the table doing extra food preparation, 2) the num-ber of visits to the table by the server
after the entree has been served, and 3) the average number of times the server refills coffee
cups or drink glasses during the dessert portion of the meal. This indicates that extra attention
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at the table seems to generate higher tips, possibly because of greater customer satisfaction.
An important implication for management is that the initial training of servers should
emphasize visits to the table as one strategy for achieving higher tips. Restaurants that
promote high customer-server interaction may enjoy an ad-ditional competitive advantage
because: 1) customers are more satisfied and more likely to return, and 2) the prospect of
higher tips may attract and retain a better server staff.
2. Service Delays
The audit also indicates that tipping is high when customers are served drinks while
they are waiting to be seated. This suggests that customers do not want to be ignored once
they have arrived, and that they have more positive perceptions of the dining experience if
they receive some level of service before they are seated. This may reveal an opportunity for
restaurants to benefit by offering other activities or services to waiting customers.
3. Ambiance Variables
The ambiance, or aesthetic atmosphere, of a restaurant is one of the most im-portant
environmental variables for competitive differentiation. Four such vari-ables-lighting level,
music level, color scheme, and presence of cooking smells were included in the study. Only
lighting levels, however, proved to have a significant correlation with tipping behavior: a low
lighting level was associated with large tips. The level of light also is associated with other
variables that have similar ef-fects on tipping. For example, nearly two-thirds of the
restaurants that used tablecloths and full place settings reported having "candlelight" or only
slightly brighter lighting. Thus, tipping behavior may be associated with the complex-ity of
the dining experience, a complex dining experience being defined as one in which overt
sensory stimulation gives way to subtle appeals (e.g., those found in very "elegant"
restaurants).
The extent to which cooking smells can be noticed supports this dining com-plexity
dimension. Cooking smells are associated very closely with brighter light levels and "homey"
or earth-tone color schemes. When comparing cooking smells with lighting, it appears that
lower lighting levels are associated with low levels of cooking smells. Restaurants whose
cooking smells are less noticeable also tend to have color schemes that utilize pastels,
whereas restaurants with "very no-ticeable" cooking smells have schemes that utilize homey
or earth-tone colors. This indicates that homey or earth-tone color schemes are associated
with a less com-plex dining experience, whereas pastels appear to be the fashion in
restaurants offering full table settings, tablecloths, and a more complex dining experience.
Creation and maintenance of the restaurant ambiance has management im-plications.
Selection of lighting levels and color schemes as well as the control of cooking smells must
present an ambiance that is consistent with the desired cus-tomer experience.
4. Check Presentation
There are two distinct ways of presenting the check, depending on whether
management wants fast turnover of customers or diners to linger after the meal is finished.
Both strategies may be positively perceived by customers and result in better tips. One way to
achieve fast turnover is to combine the clearing of each plate as the diner finishes and
presentation of the check as closely as possible following the meal. This strategy did not
necessarily mean lower tips in the audit, and it may lead to higher tips when customers want
quick; efficient service without too many frills. In some cases, however, delayed presentation
of the check also is as-sociated with higher tipping. Unlike other service interactions that
indicate long waiting times produce negative perceptions of service, a delay in presenting the
check can carry a positive perception. In the audit, a group of restaurants reported that
customers are given the bill no sooner than 3 minutes after the meal is fin-ished. Most of
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these restaurants reported higher-than-average tips provided the wait did not exceed 4
minutes.
Again, the tip as a percentage of the bill was greater than for the sample as a whole,
indicating there are some restaurants in which customers expect to be able to linger and will
show their appreciation by tipping relatively higher than the sample. This may indicate that
there is a point at which customers' percep-tions change from pleasurable lingering to
dissatisfied waiting.
5. Promotion and Suggestive Selling
Promotion variables include suggestive selling as well as promoting food and drink
items at special prices. Promotional activity has a positive effect on the din-ing experience, as
suggested by higher tips. Further, suggestive selling has a mul-tiplier effect on tips, resulting
from the added personal service and increased dol-lar amount of the bill. Thus, management
can provide suggestive-selling vehicles as a way to increase both restaurant and server
revenues.
6. Implications for Management
This study has demonstrated the importance of a walk-through-audit as an
op-portunity to evaluate the service experience from a customer's perspective, be-cause the
customer often becomes aware of cues that the owners and managers may have overlooked.
There is no inherently superior service design. Instead, there are designs that are consistent
and that provide a signal to customers about the service they can expect. Providing tangibility
in a service involves giv-ing the customer verbal, environmental, sensory, and service cues
that define the service for the customer and encourage repeat visits.
THE WALK-THROUGH-AUDIT AS A DIAGNOSTIC TOOL
The walk-through-audit can be a useful diagnostic tool for management to eval-uate the gaps
in perception between customers and managers of the service de-livery system. Customers visit a site
less frequently than managers do and, thus, are more sensitive to subtle changes (e.g., peeling paint,
worn rugs) than man-agers, who see the facility every day and likely overlook gradual deterioration of
the supporting facility.
To test this use of a walk-through-audit, a movie theater audit was prepared and administered
to movie-goers over several weekends. The same audit (i.e., questionnaire) also was given to the
manager and assistant managers. The level of detail can be seen by reviewing the complete audit,
which is shown in Figure 6.9. Note that the audit is divided into sections ordered in chronological
se-quence: general information, location, parking, ticketing, movies, lobby, con-cessions, restrooms,
theater, and post-movie categories of questions. Thus, the entire customer experience is traced from
beginning to end.
Responses for each item were averaged for the two groups and are displayed in Figure 6.10.
This presentation highlights the gaps in service perception be-tween management and customers.
Some of these gaps are not surprising, such as "adequate parking" and "prices are clearly labeled"
given that managers have assigned parking and set the prices. Other gaps suggest that some
im-provements are in order (e.g., "ticket staff are trained" and "concession staff are friendly"). It is
telling that management scores were uniformly higher than the average customer scores for all audit
questions.
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Movie Theater Service Audit
Please take a few minutes and answer the following questions about your recent movie-going
experience. There are no right or wrong answers. The purpose is to help analyze the quality of the
service across several service dimensions. For each question, please circle the number that
corresponds to your best answer. Please mark items "Not Applicable" when the item does not apply to
your experience. Thank you for your help.
Name of Theater: _______ Movie: _______
Location: _______ Movie Rating:: _______
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3.6 SERVICE RECOVERY
A service failure can be turned into a service delight by empowering front-line employees
with the discretion to "make things right." For example, when an airplane full of anxious passengers
is delayed for some minor mechanical problem, break out complementary drinks. More heroic efforts
become legends, such as the story of a Federal Express employee who hired a helicopter to repair a
downed telephone line during a snowstorm. Expenses that are incurred to accomplish a recovery are
"pennies on the dollar" compared with the possible adverse "word-of-mouth" stories that now are
turned into good stories of how an employee went the extra mile to accommodate a customer.
Table 10.9 contains some statistics on the behaviour of dissatisfied customers suggesting that
a quick resolution to service failure is an important way to create loyal customers.
All service providers experience moments of service failure at some point. Equipment failure,
delivery delays, severe weather, or human frailties (noshows, forgetful or careless employees) can
affect a service profoundly. For consumers, the coming years are going to be bleak, according to
Gartner Research. “Through 2007, more than 75% of businesses will fail to fully meet expectations
for customer service excellence—and, as a consequence, they will experience 100% turnover of their
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customer base every five years, on average. Although customer service and support, as a highlevel
concept, is discussed endlessly, businesses are failing to deliver sustained innovative processes at the
point of customer interaction,” said Michael Maoz, vice president and research director for Gartner.
Many Customer Relationship Management (CRM) software systems are available to
businesses today that allow them to track and manage information about their customers’ buying
behaviors, predict possible future behaviors, and assist them to interact positively with their customers
when a service failure occurs. Many of these programs, however, fail to roll customer feedback into
forwardlooking product and marketing plans. A bad purchase experience can alter customers’ future
buying decisions—leading them to take their business elsewhere. Yet, many current CRM systems do
not indicate that there was a customer service problem until long after the situation occurred.
Predictive analytics (predicting the needs of your customers) depends on many data points,
and thus is effective for industries with a high volume of transactions per customer, such as
telecommunications or consumer goods. In lowvolume, high ticket areas, though, a company cannot
gather enough data to make predictive analytics work. The same goes for many businesstobusiness
relationships.
Mike Trotter, executive director of Purdue University’s Center for Customer Driven Quality,
agreed that enterprises do not solicit enough feedback from customers. “Most organizations,” he told
CRMDaily, “are not in touch enough with their customers. They see surveying customers as a
necessary evil.” He asserted that companies that understand the sometimes intangible benefits of
customer input are, not surprisingly, also known as leaders in the customer loyalty realm. That’s why
companies like Schwab are doing such a good job of retaining customers. Shortly after they finish a
customer transaction, they’re sending out a followup to say, “How’d we do?” (Hill, 2002).
The most important step in service recovery is to find out as soon as possible when a service
fails to meet customers’ expectations. Customers who are dissatisfied but have no way of
communicating their dissatisfaction to the organization may never come back. Worse yet, they will
probably relate the bad experience to everyone they know. It is, therefore, imperative that companies
facilitate customer feedback and find opportunities to correct any failure situations and create a
“delighted” customer.
This feedback procedure needs to be part of the initial service design process. A key
consideration focuses on empowering frontline personnel to remedy the situation immediately. These
frontline emissaries need to be able to express empathy while taking concrete steps to assist the
customer. All attempts to rectify the situation should occur at the time and place most critical from the
customer’s perspective.
Recovering from service failures does not happen automatically; an organization must
carefully prepare for it. Hart, Heskett, and Sasser (1990) recommended the following approach:
1. Measure the costs: The old adage, “What gets measured gets managed,” is the principle
here. Service failures cost both the customer and the service organization
2. Break the silence and listen closely for complaints: Many customers do not complain if
they are not happy with a product or service. Consider the most frequently given reasons
found by Technical Assistance Research Programs (TARP), a Washington, D.C.–based
research and consulting organization:
 It’s not worth the time or effort.
 No one would be concerned with my problem or interested in acting on it.
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
I don’t know where to go or what to do.
Clearly, if a service organization does not know about service failures, it cannot do
anything about them. Using tollfree 800 numbers for complaints or suggestions;
offering rewards for suggestions; conducting regular surveys, focus groups, and
interviews of lost customers all can offer new information to uncover and thus
prevent service problems.
3. Anticipate needs for recovery: A plan and a procedure for each potential failure must be
developed, and employees must be trained in these procedures. Managers who understand
the service and its delivery system can anticipate where failures may occur and make
plans for recovery.
4. Act fast: A service organization that acts quickly to correct the situation will probably
impress the customer and make her or him forget the incident. Long, drawnout processes
and weeks of waiting will not help the customer forget the failure easily even if it is
eventually resolved satisfactorily.
5. Train employees: Effective service recovery is not possible if the employees who handle
complaints are not prepared for occasional service failures. Preparation involves training
and empowerment. Training should include developing good communication skills,
creative thinking, quick decision making, and developing an awareness of customers’
concerns. One of the most effective training methods is stimulated situations and
roleplaying.
6. Empower the front line: Quick and decisive action to remedy a service failure is not
possible without empowered employees. Many rules and limits on authority are
established because of a fear that employees will “give away the store,” which is not
likely to happen with a welltrained and motivated employee. Losing customers, however,
is much more likely if their problem is not solved.
7. Close the loop: Recovery and complaint handling must achieve closure. If the condition
that led to the problem cannot be remedied, the customer must be given an explanation. If
the complaint leads to a change in the service or the delivery system, the customer should
be told so.
3.7 SERVICE GUARANTEE
Whenever you buy a product, a warranty to guarantee its performance is expected to
guarantee a service? Impossible! Not so, according to Christopher Hart, who writes that service
guarantees exist and have five important features:
1. Unconditional. Customer satisfaction is unconditional, without exceptions. For example, L. L.
Bean, a Maine mail-order house, accepts all returns without question and provides a replacement,
refund, or credit.
2. Easy to understand and communicate. Customers should know precisely what to expect from a
guarantee in measurable terms. For example, Bennigan's promises that if a lunch is not served
within 15 minutes, the diner receives free meal.
3. Meaningful. The guarantee should be important to the customer in financials well as in service
terms. Domino's Pizza guarantees that if an order is not delivered within 30 minutes, the customer
gets $3 off rather than a free pizza, because its customers consider a rebate to be more desirable.
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4. Easy to invoke. A dissatisfied customer should not be hassled with filling out forms or writing
letters to invoke a guarantee. Cititravel, a service of Citibank, guarantees the lowest airfares or a
refund of the difference; a toll-free call to an agent is all that is necessary to confirm a lower fare
and get a refund.
5. Easy to collect. The best guarantees are resolved on the spot, as illustrated by Domino's Pizza and
Bennigan's.
A service guarantee has obvious marketing appeal. More important, however, the service
guarantee can redefine the meaning of service for an industry by setting quality standards. For
example, Federal Express defined small-parcel delivery with its overnight delivery guarantee. A
service guarantee promotes organizational effectiveness in several ways:
1. Focuses on customers. A guarantee forces a company to identify its customers' expectations.
In a survey of its passengers, British Airways found that they judged its service on four
dimensions: care and concern, initiative, problem solving, and to the airline's surprise
recovery when things goes wrong.
2. Sets clear standards. A specific, unambiguous guarantee for the customer also sets clear
standards for the organization. The Federal Express guarantee of delivery "absolutely
positively by 10:30 am" defines the responsibilities foal its employees.
3. Guarantees feedback. Customers invoking a guarantee provide valuable information for
quality assessment. Dissatisfied customers now have an incentive to complain and to get
management's attention. Manpower Inc., a temporary-worker agency, takes a proactive
approach by calling the client after the first day to get feedback on customer satisfaction.
4. Promotes an understanding of the service delivery system. Before a guarantee is made,
managers must identify the possible failure points in their system and the limits to which
these can be controlled. Burger Bug Killers, Inc., a Florida exterminator, will not guarantee or
accept a job unless the client adheres to recommended facility improvements such as sealing
doors and windows from insect penetration. Federal Express adopted a hub-and-spoke
network to ensure that all packages would be brought to Memphis in the evening for
sorting and flown out that very night for delivery by 10:30 the next morning.
5. Builds customer loyalty. A guarantee reduces the customer's risk, makes expectations
explicit, and builds market share by retaining dissatisfied cus tomers who otherwise would
leave for the competition.
3.8 THE SERVICE ENCOUNTER TRIAD
One of the unique characteristics of services is the active participation of the customer in the
service production process. Every moment of truth involves an interaction between a customer and a
service provider; each has a role to play in an environment staged by the service organization. The
service encounter triad shown in Figure 9.1 captures the relationships between the three parties in the
service encounter and suggests possible sources of conflict.
The managers of a for-profit service organization have an interest in delivering service as
efficiently as possible to protect their margins and remain competitive. Nonprofit service
organizations might substitute effectiveness for efficiency, but they still must operate under the limits
imposed by a budget. To control service delivery, managers tend to impose rules and procedures on
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the contact personnel to limit their autonomy and discretion when serving the customer. These same
rules and procedures also are intended to limit the extent of service provided for the customer and the
resulting lack of customization that might result in a dissatisfied customer. Finally, the interaction
between contact personnel and the customer has the element of perceived control by both parties. The
contact people want to control the behavior of the customer to make their own work more manageable
and less stressful; at the same time, the customer is attempting to gain control of the service encounter
to derive the most benefit from it.
Ideally, the three parties gain much by working together to create a beneficial service encounter. The
moment of truth can be dysfunctional, however, when one party dominates the interaction by focusing
solely on his or her own control of the encounter. The following examples illustrate the conflict that
arises when each party in turn dominates control of the encounter.
Encounter Dominated by the Service Organization
To be efficient and, perhaps, to follow a cost leadership strategy, an organization may standardize
service delivery by imposing strict operating procedures and, thus, severely limiting the discretion of
the contact personnel. Customers are presented with a few standard service options from which to
choose, and personalized service is not available. Many franchise services such as McDonald's, Jiffy
Lube, and H. & R. Block have been successful with a structural organization and environment that
dominates the service encounter. Much of their success has resulted from teaching customers what not
to expect from their service; however, much of the frustration that customers experience with other
institutions, labeled pejoratively as "bureaucracies," is the result of contact personnel having no
autonomy to deal with individual customer's needs. Contact personnel in such organizations may
sympathize with the customer but are forced to go "by the book," and their job satisfaction is
diminished in the process.
Contact Personnel-Dominated Encounter
In general, service personnel attempt to limit the scope of the service encounter to reduce
their own stress in meeting demanding customers. When contact personnel are placed in an
autonomous position, they may perceive themselves as having a significant degree of control over
customers. The customer is expected to place considerable trust in the contact person's judgment
because of the service provider's perceived expertise. The relationship between physician and patient
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best illustrates the shortcomings of the contact personnel-dominated en-counter. The patient, who is
not even referred to as a "customer," is placed in a subordinate position with no control over the
encounter. Further, an allied organization, such as a hospital in this case, is subjected to tremendous
demands placed on it by individual staff physicians with no regard for matters of efficiency.
Customer-Dominated Encounter
The extremes of standardized and customized services represent opportunities for customers
to control the encounter. For standardized services, self-service is an option that gives customers
complete control over the limited service that is provided. For example, at a self-service gasoline
station that is equipped with a credit card reader, the customer need not interact with anyone. The
result can be very efficient and satisfying to the customer who needs or desires very little service. For
a customized service such as legal defense in a criminal case, however, all the organization's resources
may be needed, at great cost in efficiency.
A satisfactory and effective service encounter should balance the need for control by all three
participants. The organization's need for efficiency to remain economically viable can be satisfied
when contact personnel are trained properly and the customer's expectations and role in the delivery
process are communicated effectively. Our discussion of approaches to managing the service
encounter begins with the service organization.
1. THE SERVICE ORGANIZATION
The service organization establishes the environment for the service encounter. The
interaction between customer and contact personnel occurs within the context of an
organization's culture as well as its physical surroundings.
Culture
Why do you choose one service over another-Supermarket A over supermarket B,
copying service X over copying service Y, or family practitioner M over family practitioner
D? Cost, you may answer ... or ambiance or any of several other good reasons. The bottom
line, however, may be corporate culture, because the underlying culture helps to determine
the value that customers place on the service. Several definitions of organizational culture
have been proposed:



Culture is a pattern of beliefs and expectations that is shared by the organization's
members and produces norms that powerfully shape the behavior of individuals or
groups in organizations.
Culture is the traditions and beliefs of an organization that distinguish it from other
organizations and infuse a certain life into the skeleton of structure.
Organizational culture is a system of shared orientations that hold the unit together
and give a distinctive identity.
The founders and/or senior managers of a service organization establish, whether
purposely or unintentionally, a climate or culture that prescribes a norm of behavior or set of
values to guide employee decision making in the firm. Take, for example, ServiceMaster, a
very profitable company that provides hospitals and other organizations with housekeeping
services. Writing about Service Master, Carol Loomis discovered that the company's name
embodied its value of "Service to the Master."
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Founded by a devout Baptist, the late Marion E. Wade, the company has always
described itself as driven by religious principle. The first of its corporate objectives is "to
honor God in all we do." The cafeteria wall at ServiceMaster's suburban headquarters
proclaims that "Joy cometh in the morning," and although there are no "Cleanliness is next to
Godliness" signs around, the neatness and shine of the office project the thought.
Choice of language is another approach to communicate values, as illustrated by the
Walt Disney Corporation. At Disney theme parks, show business terms are used because they
are in the entertainment business. Instead of Personnel there is Casting. Employees are
referred to as "cast members" to instill the appropriate frame of mind. Cast members work
either "onstage" or "backstage," but both kinds of employees are required to "put on the
show."
The examples above illustrate how an organization's values, when consistently
communicated by management, permit contact personnel to act with considerable autonomy,
because their judgment is founded on a shared set of values. These values often are
communicated by stories and legends about individual risk-taking on behalf of the
organization and its customers. Federal Express, with a motto of "absolutely positively
overnight," has many stories of extraordinary employee feats to safeguard that service
guarantee. Consider, for example, the pick-up driver who was faced with a collection box he
was unable to open-instead of leaving it standing on the street comer until someone could
come out to repair it, he wrestled the entire box into his vehicle so that the packages it
contained could be liberated and delivered the next day.
The organization benefits from a shared set of values, because contact personnel are
empowered to make decisions without the need for the traditional level of supervision, which
assumes that only management is vested with authority to act on behalf of the organization.
Empowerment
For years, McDonald's has served as the model of efficient service delivery.
Incorporating the traditional mass-production philosophy of industry, McDonald's has been
successful in delivering a consistent meal to billions of customers through an organization
that could be described as "manufacturing in the field." The discretion of contact personnel is
limited by procedures and design (e.g., the trench fry scoop that guarantees portion control).
Most employees are minimum-wage teenagers, and high turnover is the norm. The
organization's structure is pyramid-shaped, with layers of supervision from the assistant store
manager, store manager, and regional manager to corporate "consultants," to ensure
consistency of service delivery across all locations.
A new model of service organization now is emerging that has a structure best
described as an inverted T. In this organization, the layers of supervision are drastically
reduced, because contact personnel are trained, motivated, and supplied with timely,
computer-based information that enables them to manage the service encounter at the point of
delivery.
Jan Carlzon, the innovative president of SAS, is quoted as saying:
Instructions only succeed in providing employees with knowledge of their own
limitations. Information, on the other hand, provides them with a knowledge of their
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opportunities and possibilities. To free someone from rigorous control by instructions,
policies and orders, and to give that person freedom to take responsibility for his ideas,
decisions and actions, is to release hidden resources which would otherwise remain
inaccessible to both the individual and the company ... A person who has information cannot
avoid taking responsibility.
Perhaps it is surprising that Taco Bell has become the new service model of employee
empowerment. Other firms adopting this new model include Service Master, Marriott, and
Dayton Hudson. Senior managers of these firms all share a belief that people want to do good
work-and will do so if given the opportunity. Consequently, they have made the following
commitments: 1) to invest in people as much as, or more than, in machines; 2) to use
technology to support contact personnel rather than to monitor or replace them; 3) to consider
the recruitment and training of contact personnel as critical to the firm's success; and 4) to
link compensation to performance for employees at all levels. In this type of organization, a
much-reduced middle management no longer has the traditional supervisory role; instead,
middle managers become facilitators for the front-line or contact personnel. More important,
investment in computer information systems is necessary to supply the front-line personnel
with the ability to resolve problems as they arise and to ensure a quality service encounter.8
Empowered contact personnel must be motivated, informed/ competent, committed,
and well-trained. Front-line personnel should exhibit the ability to take responsibility, manage
themselves, and respond to pressure from customers.
2. CONTACT PERSONNEL
Ideally, customer contact personnel should have personality attributes that include
flexibility, tolerance for ambiguity, an ability to monitor and change behavior on the basis of
situational cues, and empathy for customers. The last attribute (i.e., empathy for customers)
has been found to be more important than age, education, sales-related knowledge, sales
training, and intelligence. Some individuals may find front-line service to be boring and
repetitive, whereas others see the job as providing an opportunity to meet and interact with a
variety of people. Those with the necessary interpersonal skills may gravitate toward highcontact service jobs, but a selection process still is required to en¬sure high-quality moments
of truth.
Selection
No reliable tests exist to measure a person's service orientation; however, a va¬riety
of interviewing techniques have proven to be useful. Abstract questioning, the situational
vignette, and role playing all have been used in evaluating po¬tential front-line employees.
a. Abstract Questioning
The questions asked in the abstract interview are open-ended. They provide insights
regarding an applicant's ability to relate the immediate service situation to information
collected from past experience. An example of a question that assesses an applicant's
attention to the environment would be "From your past work experience, what type of
customer was most difficult for you to deal with and why?" To determine if an applicant
actively collects information, a questioner might ask, "What was the customer's primary
complaint or negative characteristic?" Some final questions to evaluate the applicant's
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interpersonal style could be "How did you handle the customer?" and "What would be the
ideal way to deal with that type of customer?"
Abstract questioning also can be used to reveal a person's willingness to adapt. An
effective employee will take notice of details in his or her personal life as well as on the
job. People who consider the events around them and can describe their significance
usually are able to learn more as well as faster.
Because of their nature and preparation for the interview, some applicants will be
better able than others to talk extensively about their past experiences. Careful listening
and probing by the interviewer for the substance of an answer to an abstract question will
lessen the possibility of being deceived with "puffery." Finally, there is no assurance that
the ability to reflect on past events necessarily will guarantee that such perceptiveness and
flexibility will transfer to the job.
b. Situational Vignette
A situational vignette interview requires the applicant to answer questions regarding a
specific situation. For example, consider the following situational vignette:
The day after a catering service has catered a large party, a customer returns some
small cakes, claiming they were stale. Although the man is demanding a refund, he is so
soft-spoken and timid that you can hardly hear him across the counter. You know that
your business did not make those cakes, because they don't look like your chef's work.
What would you do?
Presenting a situation like this may reveal information regarding an applicant's
instincts, interpersonal capabilities, common sense, and judgment. To gain more
information about a candidate's adaptability, further questions about the situation can be
asked: "How would you handle the man if, suddenly, he were to become irate and
insistent? What steps would you take to remedy the situation?"
Situational vignettes provide an opportunity to determine whether applicants are
able to "think on their feet." An applicant with good communication skills, however, still
may not indicate clearly a genuine desire to serve customers or an empathic nature.
Again, the interviewer must pay close attention to the substance of an applicant's response
in addition to the way it is delivered.
c. Role Playing
Role playing is an interviewing technique that requires applicants to participate in a
simulated situation and to react as if this service environment were real. Role playing
often is used in the final phase of recruitment, and others in the organization are asked to
cooperate by posing as "actors" for the situation.
Role playing provides a way for an interviewer to observe an applicant under stress.
Interviewers using this technique may probe and change the situation as the session
progresses. This method allows for more realistic responses than either the abstract
questioning or situational vignette interviews; applicants are required to use their own
words and react to the immediate situation instead of describing them.
Although role playing provides an excellent opportunity to observe a candidate's
strengths and weaknesses in a realistic customer encounter, direct comparison of
applicants is difficult. Role playing does require careful scripting, and the "actors" need to
rehearse their roles before the interview.
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d. Training
Most training manuals and employee handbooks for customer-contact personnel are
devoted to explaining the technical skills that are needed to perform the jobs. For
example, they often detail explicitly how to fill out guest reports, use cash registers, dress
properly, and enforce safety requirements, but customer interaction skills are dismissed
with a simple comment to be pleasant and smile.
Unrealistic Customer Expectations
Approximately 75 percent of the reported communication difficulties arise from
causes other than a breakdown in the technical service delivery. These difficult encounters
involve customers with unrealistic expectations that cannot be met by the service delivery
system. Examples include passengers who bring oversize luggage aboard an airplane or diners
who snap fingers and yell at servers. Unrealistic customer expectations can be broken down
into six categories:
a. Unreasonable demands: Services that the firm cannot offer, or customer demands that
require inappropriate time and attention (e.g., "I want to carry all my luggage on board,"
or "Please sit with me; I'm afraid of flying").
b. Demands against policies: Requests that are impossible to fulfill because of safety
regulations, laws, or company policies (e.g., "We've been waiting an hour for takeoff, and
I must have my smoke," or "Our party of ten wants separate checks for the meal").
c. Unacceptable treatment of employees: Mistreatment of employees with verbal or
physical abuse (e.g., "You idiot! Where is my drink?" or a diner pinching a waitress).
d. Drunkenness: Intoxicated customer requiring special attention (e.g., "Bring me another
drink!" or an intoxicated passenger who requires assistance to get off the plane).
e. Breaking of societal norms: Customers breaking societal norms in general (e.g., "We
can't sleep because of the loud TV in the next apartment," or guests swimming nude in the
pool).
f. Special-needs customers: Special attention to customers with psychological, medical, or
language difficulties (e.g., "My wife is hemorrhaging," or "Wieviel kostet das?").
Unexpected Service Failure
A failure in the service delivery system places a communication burden on the
contact personnel. Service failures, however, provide a unique opportunity for contact
personnel to demonstrate innovation and flexibility in their recovery. Three categories of
service failures can be identified:
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a. Unavailable service: Services that normally are available or expected are lacking (e.g., "I
reserved a table by the window," or "Why is the ATM out of order?").
b. Slow performance: Service is unusually slow, creating excessive customer, waiting (e.g.,
"Why hasn't our plane arrived?" or "We've been here for an hour, and no one has taken
our order").
c. Unacceptable service: Service does not meet acceptable standards (e.g., "My seat doesn't
recline," or "Eeegads, there's a hair in my soup!").
Unavoidable communication difficulties with customers require contact personnel
whose training and interpersonal skills can prevent a bad situation from becoming worse.
Programs can be developed to train contact personnel to use prescribed responses in given
situations. For example, when faced with unreasonable demands-as illustrated above for
category 1 difficulties the server can appeal to the customer's sense of fairness by pointing out
that the needs of other customers would be jeopardized. Actual scripts also can be developed
and rehearsed for each anticipated situation. For example, in response to "I want to carry all
my luggage on board," the employee need only say, "I'm very sorry, but federal safety
regulations permit a passenger only two carry-on pieces small enough to be stored under the
seat or overhead. May I check your larger pieces all the way to your final destination?"
Another approach involves general training in communication skills. This approach
should help contact personnel to anticipate the types of exchanges they might encounter,
expand their repertoire of possible responses, and develop decision rules for choosing
appropriate responses to a given situation. Role playing can provide an ideal setting for
gaining this communication experience. Contact personnel who are well trained will be able
to control the service encounter in a professional manner, and the results will be increased
satisfaction for the customer and decreased stress and frustration for the provider.
3. THE CUSTOMER
Every purchase is an event of some importance for the customer, whereas the same
transaction usually is routine for the service provider. The emotional involvement that is
associated with the routine purchase of gasoline at a self-serve station or an overnight stay at
a budget hotel is minor, but consider the very personal and dramatic roles played by a
customer taking an exotic vacation or seeking medical treatment. Unfortunately, it is very
difficult for the bored contact personnel, who see hundreds of customers a week, to maintain a
corresponding level of emotional commitment.
Expectations and Attitudes
Service customers are motivated to look for a service much as they would for a
product; similarly, their expectations govern their shopping attitudes. Gregory Stone
developed a now-famous topology in which shopping-goods customers were classified into
four groups. The definitions that follow have been modified for the service customer:
a. The economizing customer: This customer wants to maximize the value obtained
for his or her expenditures of time, effort, and money. He or she is a demanding and
sometimes fickle customer who looks for value that will test the competitive strength
of the service firm in the market. Loss of these customers serves as an early warning
of potential competitive threats.
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b. The ethical customer: This customer feels a moral obligation to patronize socially
responsible firms. Service firms that have developed a reputation for community
service can create such a loyal customer base; for example, the Ronald McDonald
House program for the families of hospitalized children has helped the image of
McDonald's in just this way.
c. The personalizing customer: This customer wants interpersonal gratification, such
as recognition and conversation, from the service experience. Greeting customers on
a first-name basis always has been a staple of the neighborhood family restaurant, but
computerized customer files can generate a similar personalized experience when
used skillfully by front-line personnel in many other businesses.
d. The convenience customer: This customer has no interest in shopping for the
service; convenience is the secret to attracting him or her. Convenience customers
often are willing to pay extra for personalized or hassle-free service; for example,
supermarkets that provide home delivery may appeal to these customers.
The attitude of customers regarding their need to control the service encounter was
the subject of a study investigating customers' decision-making processes when they were
confronted with the choice between a self-service option and the traditional full-service
approach.10 Customers who were interviewed appeared to be using the following dimensions
in their selection: 1) amount of time involved, 2) customer's control of the situation, 3)
efficiency of the process, 4) amount of human contact involved, 5) risk involved, 6) amount
of effort involved, and 7) customer's need to depend on others.
It is not surprising that customers who were interested in the self-service option found
the second dimension (i.e., customer's control of the situation) to be the most important factor
in choosing that option. The study was conducted over a variety of services, ranging from
banks and gas stations to hotels and airlines.
The Customer as Coproducer
In the service encounter, both the provider and the customer have roles to play in
transacting the service. Society has defined specific tasks for service customers to perform,
such as the procedure required for cashing checks at a bank. Diners in some restaurants may
assume a variety of productive roles, such as assembling their meals and carrying them to the
table in a cafeteria, serving themselves at a salad bar, or busing their own tables. In each case,
the customer has learned a set of behaviors that is appropriate for the situation. The customer
is participating in the service delivery as a partial employee with a role to play and is
following a script that is defined by societal norms or implied by the particular design of the
service offered.
Customers possess a variety of scripts that are learned for use in different service
encounters. Following the appropriate script allows both the customer and service provider to
predict the behavior of each other as they play out their respective roles. Thus, each
participant expects some element of perceived control in the service encounter. Difficulties
can arise, however, when new technology requiring a new or redefined script is introduced
into the service encounter.
Customer resistance to new forms of service transactions-such as the introduction of
Universal Product Codes in supermarkets, which removed the need for item pricing, and
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automated teller machines (ATMs) in banking, which eliminated the need for human
interaction-may be explained by the need to learn a radically new script. What once was a
"mindless" routine service encounter now requires some effort to learn a new role. For
example, when ATMs were first introduced, a sample machine was placed in the bank lobby
so that customers could practice their new role.
Teaching customers a new role can be facilitated if the transition becomes a logical
modification of past behavior. Public acceptance of the Windows operating system for PCs
can be attributed to the fact that all applications share the same interface; thus, only one script
must be learned.
CREATING A CUSTOMER SERVICE ORIENTATION
A study of 23 branch banks revealed a high correlation between customers and employees'
perceptions of service quality. Each dot in Figure 9.2 represents data from a different branch bank.
Employees were asked: "How do you think the customers of your bank view the general quality of the
service they receive in your branch?" Customers were asked: "Describe the general quality of the
service received in your branch." Both groups graded service on the same six-point scale.
Further analysis showed that customers perceived better service in branches where employees
reported the following:
1. There is a more enthusiastic service emphasis.
2. The branch manager emphasizes service as personnel perform their roles.
3. There is an active effort to retain all customer accounts, not just large-account
holders.
4. The branch is staffed with sufficient, well-trained tellers.
5. Equipment is well maintained, and supplies are plentiful.
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In addition, when employees described their branch as one in which the man¬ager
emphasized customer service, customers not only reported that service was superior but, more
specifically, that:
1.
2.
3.
4.
5.
Tellers were courteous and competent.
Staffing levels were adequate.
The branch appeared to be well administered.
Teller turnover was low.
The staff had positive work attitudes.
From this study, it appears that when employees perceive a strong service orientation,
customers report superior service. Creating a customer service orientation results in superior service
practices and procedures that are observable by customers and, further, seem to fit employee views of
the appropriate style for dealing with customers. Thus, even though employees and customers view
service from different perspectives, their perceptions of organizational effectiveness are positively
related.
A lesson for management also is suggested. The way management relates to the contact
personnel (or internal customers) is reflected in how the external customers are treated.
As shown in Figure 9.3, however, some discrepancies between employee and management
perceptions of service goals also were evident in this same study. This lack of congruence between
employees and management eventually affects customer perceptions of service quality, because
management emphasis in a ser¬vice organization cannot be hidden from those who are served.
THE SERVICE PROFIT CHAIN
The service profit chain proposes a series of relationships linking profitability, customer
loyalty, and employee satisfaction, retention, and productivity. As Figure 9.4 shows, profitability and
revenue growth are derived from loyal customers, and loyal customers result from satisfaction, which
is influenced by the perceived value of the service. Service value is created by satisfied, committed,
and productive employees, and employee satisfaction is generated by investing in information
technology, training, and a policy of employee empowerment.
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1. Internal quality drives employee satisfaction. Internal quality describes the environment in
which employees work, and it includes employee selection and development, rewards and
recognition, access to information to serve the customer, workplace technology, and job
design. For example, at USAA, a financial services company serving military officers,
telephone service representatives are supported by a sophisticated information system that
puts complete customer information files on their monitor when a customer gives them a
membership number. The facility is located in suburban San Antonio on acres of property and
resembles a small college campus. Using 75 classrooms, state-of-the-art job-related training is
an expected part of every¬ one's work experience.
2. Employee satisfaction drives retention and productivity. In most service jobs, the real cost of
employee turnover is loss of productivity and decreased customer satisfaction. In personalized
service firms, low employee turnover is linked closely to high customer satisfaction. For
example, the cost of losing a valued broker at a securities firm is measured by the loss of
commissions during the time his or her replacement is building relationships with customers.
Employee satisfaction also can contribute to productivity. Southwest Airlines has consistently
been the most profitable airline in part because of its high rate of employee retention, with
turnover of less than 5 percent per year—the lowest in the industry.
3. Employee retention and productivity drives service value. At Southwest Airlines, customer
perceptions of value are very high even though the airline does not assign seats, offer meals,
or integrate its reservation system with other carriers. Customers place high value on frequent
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departures, on-time service, friendly employees, and very low fares (60 to 70 percent lower
than existing fares in the markets it enters). These low fares are possible in part because
highly trained, flexible employees can perform several jobs and turn around an aircraft at the
gate in 15 minutes or less.
4. Service value drives customer satisfaction. Customer value is measured by comparing the
results received to the total costs incurred in obtaining the service. Progressive Corporation, a
casualty insurance company, is creating customer value by processing and paying claims
quickly and with little effort required by its policyholders. By flying a team to the scene of
major catastrophes, Progressive is able to process claims immediately, provide support
services, reduce legal costs, and actually place more money in the hands of injured parties.
5. Customer satisfaction drives customer loyalty. When Xerox polled its customers using a fivepoint scale ranging from "extremely dissatisfied" to "very satisfied," it discovered that "very
satisfied" customers were six times more likely to repurchase Xerox equipment than those
who were just "satisfied." Xerox calls these very satisfied customers "apostles," because they
will convert the uninitiated to their product. At the other extreme are the "terrorists,"
customers who are so unhappy that they speak out against the product; this is a group to avoid
creating.
6. Customer loyalty drives profitability and growth. Because a 5 percent increase in customer
loyalty can increase profits by 25 to 85 percent, the quality of market share, which is
measured in terms of customer loyalty, deserves as much attention as the quantity of market
share. For example, Bane One, which is a profitable bank based in Columbus, Ohio, has
developed a sophisticated sys¬ tem to track customer loyalty by measuring the number of
services that customers use and the depth of their relationship with Bane One.
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